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home / study / business / finance / finance questions and answers / Jim Halter, The Majority Shareholder Of J-Mart Jewelry Outlets, Inc., Was Aware That J-Mart ... Question: Jim Halter, the majority shareholder of J-Mart Jewelry Outlets, Inc., was aware that J-Mart was i... Jim Halter, the majority shareholder of J-Mart Jewelry Outlets, Inc., was aware that J-Mart was in financial trouble. Before J-Mart went out of business, Halter paid off his personal credit cards using corporate funds. There was specific evidence that the $6, 902.87 balance on Halter’s American Express personal account was paid by J-Mart, eight days before it ceased doing business. The check was marked “PAYMENT IN FULL – JIM’S PERSONAL”. There was also evidence that J-Mart, knowing that it would soon cease doing business, purchased a new Cadillac for Halter’s use. J-Mart then made three (3) payments on the vehicle before transferring it to Halter for $1.00 and allowing him to assume the remaining payments. After J-Mart ceased operations, four (4) of its creditors brought suit against Halter in an attempt to recover amounts they were owed. The jury at the trial court level pierced the corporate veil and held Halter personally responsible for the debts. Halter appealed and the appellate court affirmed the ruling of the trial court. Given what you know of the facts of the case, could Halter have provided any information that would lead you to believe he was not responsible for the debts? What would it be?

Answer 1

Jim Halter knew that J-Mart would go out of business and paid off his personal credit cards using corporate funds and this was specifically mentioned in the check as "PAYMENT IN FULL - JIM'S PERSONAL". Furthermore, J-Mart knowing that it would go out of business, purchased a new Cadillac for Halter's use. It made three payments on the vehicle before transferring it to Halter for $1.00 and allowed him to assume the remaining payments.

By looking at the case, it can be clearly seen that J-Mart was trying to implicate Jim Halter for debts incurred by J-Mart.

1) J-Mart specifically mentioned the payment as Jim Halter's personal payment from the corporate funds by mentioning it in the check issued eight days prior to J-Mart going out of business. Jim Halter would have tried to hide this fact while making personal payments from J-Mart's corporate account.

2) J-Mart also purchased a new Cadillac for Halter's use and transferred it to his name after making the intial three payments. It was transferred to Halter at a nominal amount of $1.00 and J-Mart allowed him to assume the remaining payments. Since J-Mart was going out of business and knew about this fact, it should not have bought the car for Halter's use other than to implicate Halter. Also, J-Mart should not have transferred it to Halter at a nominal amount of $1.00 for his personal use before ceasing operations.